Delphi Technologies (DLPH) Rides on Strategic Business Moves

Delphi Technologies PLC DLPH looks strong on the back of its vast global network and innovative product portfolio with updated technologies. The aftermarket business generates stable recurring revenues.

Notably, Delphi Technologies reported strong first-quarter 2018 results. Adjusted earnings of $1.30 per share beat the consensus mark by 14 cents but were down by a penny from the year-ago quarter. Net revenues of $1.30 billion beat the Zacks Consensus Estimate of $1.26 billion. The figure was up 10.9% year over year on a reported basis and 5% on an adjusted basis.

Despite such impressive results, we observe that shares of Delphi Technologies have declined 17.4% against the industry’s rise of 11.9% on a year-to-date basis.

What’s Driving Delphi Technologies?

Delphi Technologies has a geographically diverse revenue base. Region-wise, it derived 43.6% of revenues from Europe, the Middle East and Africa (EMEA), 27.5% from North America, 26% from the Asia Pacific and 2.7% from South America in first-quarter 2018. The company is highly optimistic about opportunities in the Asia Pacific region. Net sales from this region grew almost 16.5% to $339 million in the quarter. Increasing levels of vehicle production in the region is encouraging.

Regional presence coupled with its diversified and innovative product portfolio with updated technologies should help Delphi Technologies become a solid choice for original equipment manufacturers (OEMs). This is because OEMS are focused on increasing efficiency and expanding their global manufacturing footprint by choosing suppliers with global scale who can easily adapt to regional variations.

Additionally, Delphi Technologies is also optimistic about the opportunities from its aftermarket business. Through its aftermarket product portfolio, it offers an extensive range of solutions, which includes fuel injection, electronics and engine management, maintenance, and test equipment and vehicle diagnostics categories, to leading aftermarket companies, including independent retailers and wholesale distributors. Demand for aftermarket products and services depends on the growing number of vehicles, their life-cycles and total miles covered by them. While replacement of many of its aftermarket products is non-discretionary in nature, the company generates stable recurring revenues from the aftermarket business.

Some other top-ranked stocks in the broader Business Services sector include Blucora BCOR, IQVIA Holdings IQV and Aptiv APTV. While Blucora sports a Zacks Rank #1, IQVIA Holdings and Aptiv carry a Zacks Rank #2.

The long-term expected earnings per share growth rate for Blucora, IQVIA Holdings and Aptiv is 20%, 11.8% and 13.4%, respectively.

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